The Pricing of Equity Ipos that Follow Public Debt Offerings

22 Pages Posted: 24 Dec 2004

See all articles by Kelly Nianyun Cai

Kelly Nianyun Cai

University of Michigan at Dearborn - School of Management

Latha Ramchand

University of Houston

Arthur Warga

University of Houston - Department of Finance

Abstract

We examine the underpricing of initial public offerings (IPOs) of equity by firms that make prior public debt offerings. We find that subsequent IPOs are associated with significantly lower underpricing. Further, the price dispersion of the preliminary filing price range is smaller, as is the price revision subsequent to information gathering during the road show. The lower underpricing is confined to subsequent IPOs that are rated. Since rated IPOs tend to be financially stronger than non-rated IPOs, our results suggest that a longer history of information helps reduce the indirect cost of issue for good quality firms.

Suggested Citation

Cai, Kelly Nianyun and Ramchand, Latha and Warga, Arthur, The Pricing of Equity Ipos that Follow Public Debt Offerings. Financial Management, Vol. 33, No. 4, Winter 2004. Available at SSRN: https://ssrn.com/abstract=634941

Kelly Nianyun Cai

University of Michigan at Dearborn - School of Management ( email )

19000 Hubbard Dr.
Dearborn, MI 48126
United States

Latha Ramchand (Contact Author)

University of Houston ( email )

Houston, TX 77204
United States
713-743-4769 (Phone)

Arthur Warga

University of Houston - Department of Finance ( email )

Houston, TX 77204
United States
713-743-4779 (Phone)
713-743-4789 (Fax)

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